Bloomberg News

Asian Stocks Retreat as Higher Oil Damps Optimism

February 27, 2012

Asian stocks fell, with a regional benchmark index retreating after a record 10-week advance, as oil near a nine-month high and continued concern that Greece will not be able to avoid a default spurred investors to lock in gains.

Korean Air Lines Co., the nation’s biggest carrier by market value, sank 5.3 percent in Seoul. Esprit Holdings Ltd. (330), a clothier that gets most of its revenue from Europe, slid 3 percent in Hong Kong. Sony Corp. (6758), Japan’s No. 1 exporter of consumer electronics, gained 1.2 percent in Tokyo as the yen fell to a nine-month low against the dollar, boosting the earnings outlook for the country’s exporters.

The MSCI Asia Pacific Index slid 0.8 percent to 126.97 as of 8:16 p.m. in Tokyo, accelerating its drop after Moody’s Investors Service said the risk that Greece will default “remains high.” The index advanced for a 10th week last week, its longest run of gains since its inception in 1988. Shares rose amid confidence China will ease monetary policy and signs the U.S. economy is improving.

“Oil prices are definitely a concern,” Bharat Joshi, who helps manage $5 billion at Kuala Lumpur-based Aberdeen Asset Management Sdn., said in a telephone interview today. “People are worried about inflation trickling into the economy. The market has also risen quite dramatically. The issue with Greece and Europe continues to be in the background.”

Japan’s Nikkei 225 Stock Average (NKY) slipped 0.1 percent after swinging between gains and losses. The yen touched 81.67 per dollar today, the lowest level since May 31. A weaker yen boosts exporters’ overseas earnings when repatriated.

Sony gained 1.2 percent to 1,760 yen, while Honda Motor Co., Japan’s second-largest carmaker by market value, rose 1.6 percent to 3,140 yen.

Boost to Exporters

A gauge of smaller companies on the Tokyo bourse’s second section rose for a 30th day, extending its longest stretch of gains since 1961. Kagetsuenkanko Co., a hotel and resort manager, climbed 40 percent to 161 yen, the biggest increase on the TSE Second Section Price Index. The stock has risen 475 percent since Jan. 16, the last close before the gauge began its streak.

“It’s a huge fuel for Japanese exporters if the yen can maintain or continue to depreciate from current levels given it’s been such a substantial headwind,” said Tim Schroeders, who helps manage $1 billion in equities at Pengana Capital Ltd. in Melbourne.

The MSCI Asia Pacific Index (MXAP) gained 12 percent this year through yesterday, compared with an 8.6 percent increase by the S&P 500 and an 8.3 percent advance by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 14.9 times estimated earnings on average, compared with 13.1 times for the S&P 500 and 11.1 times for the Stoxx 600.

Leadership Ballot

Australia’s S&P/ASX 200 Index slid 0.9 percent. Australian Prime Minister Julia Gillard defeated former leader Kevin Rudd in a Labor Party leadership ballot today, leaving her to unite the government and revive poll ratings before elections due in 2013.

Singapore’s Straits Times Index fell 1.1 percent. South Korea’s Kospi (KOSPI) Index retreated 1.4 percent. Inflation may exceed the South Korean government’s target as oil prices rise, Finance Minister Bahk Jae Wan said at the weekend in Mexico City, where leaders from the Group of 20 nations met.

Crude for April delivery slid as much as 0.8 percent today. Oil gained 1.8 percent to $109.77 a barrel in New York on Feb. 24, advancing for a seventh day, the longest stretch since January 2010.

Airlines Retreat

Korean Air Lines slumped 5.3 percent to 50,000 won in Seoul, while ComfortDelGro Corp. (CD), a bus, taxi and car leasing provider, fell 2.7 percent to S$1.470 in Singapore. Air China Ltd. the world’s biggest carrier by market value, fell 5.9 percent to HK$5.59 in Hong Kong.

“The higher the oil price goes, the bigger the brake on consumers, which is concerning,” said Matt Riordan, who helps manage $6.8 billion in Sydney at Paradice Investment Management Pty. “Europe still has work to do in terms of the great bailout and there seems to be some things various parties can’t agree upon, so that’s winding down on the market at the moment.”

Hong Kong’s Hang Seng Index (HSI) fell 0.9 percent, reversing an earlier advance. China’s Shanghai Composite Index gained 0.3 percent on expectations the government will further ease monetary policies to spur economic growth. Shanghai Securities News reported today interbank deposits should be added to the calculation of loan-to-deposit ratios for banks to help boost lending, citing former People’s Bank of China Deputy Governor Wu Xiaoling.

U.S. Futures

Futures on the Standard & Poor’s 500 Index (SPXL1) dropped 0.5 percent today. The index climbed 0.2 percent in New York on Feb. 24 amid better-than-estimated consumer sentiment and home sales reports. German lawmakers vote on a second Greek rescue package today and European Union heads of government hold a summit March 1-2 in Brussels.

Esprit fell 3 percent to HK$17.24 in Hong Kong, while HSBC Holdings Plc, Europe’s biggest bank by market value, declined 1.2 percent to HK$69.60.

The world economy is “not out of the danger zone” amid fragile financial systems, high public and private debt and rising oil prices, International Monetary Fund Managing Director Christine Lagarde said in a statement after the weekend G-20 meeting.

Himart Co. (071840), a consumer electronics retailer, tumbled 15 percent to 64,300 won in Seoul. Prosecutors confiscated documents and a computer during a raid on the company’s headquarters, Himart spokesman Yang Dong Chul said, declining to say why the raid took place.

Elpida Debts

Elpida Memory Inc., the Japanese chipmaker facing an April deadline to repay debts, will file for bankruptcy protection as soon as today, according to a person with direct knowledge of the matter, who requested anonymity before an official announcement. The Nikkei reported earlier after the market close that the company will file for bankruptcy protection. The stock rose 0.6 percent to 334 yen.

Parco Co. (8251), an operator of shopping centers, jumped 11 percent to 855 yen in Tokyo after J Front Retailing Co. agreed to buy 33 percent of its competitor.

To contact the reporters on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net; Gan Yen Kuan in Kuala Lumpur at ykgan@bloomberg.net.

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net


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